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Embattled ride-hailing giant Uber scored a court victory Thursday, when a federal appeals court ruled in favor of allowing the ride-hailing company to keep its users from filing lawsuits in court against it.
Uber has sought to force customer disputes to be resolved in arbitration instead of in court, citing an arbitration commitment in its user agreement.
Uber's user agreement contains a provision that forces customers to waive their right to sue the company. Instead, according to the agreement, Uber users must settle legal disputes they have with the company in private arbitration outside of a court. Arbitration differs from a government court in that parties involved can choose their own judges. Also, the results of the arbitration can be made confidential.
Other internet companies such as Airbnb, Netflix and Amazon have arbitration policies. U.S. senators have battled with AT&T over its policy of forcing consumers who sign phone contracts with the company to resolve their disputes through arbitration.
"No AT&T customer is ever 'forced' to agree to arbitration," AT&T Executive VP Tim McKone wrote in a letter to senators, in June. "Customers accept their contracts with AT&T freely and voluntarily.”
At its core, arbitration is a form of dispute resolution. Arbitration is the private, judicial determination of a dispute, by an independent third party. An arbitration hearing may involve the use of an individual arbitrator or a tribunal. A tribunal may consist of any number of arbitrators though some legal systems insist on an odd number for obvious reasons of wishing to avoid a tie. One and three are the most common numbers of arbitrators. The disputing parties hand over their power to decide the dispute to the arbitrator(s). Arbitration is an alternative to court action (litigation), and generally, just as final and binding (unlike mediation, negotiation and conciliation which are non-binding).
General principles of arbitration are as follows:
- The object of arbitration is to obtain a fair resolution of disputes by an impartial third party without unnecessary expense or delay.
- Parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest.
- Courts should not interfere.
Arbitrators, or Tribunal members, are commonly appointed by one of three means:
1. Directly by the disputing parties (by mutual agreement, or by each party appointing one arbitrator)
2. By existing tribunal members (For example, each side appoints one arbitrator and then the arbitrators appoint a third)
3. By an external party (For example, the court or an individual or institution nominated by the parties)
Corporations said that class actions were not needed because arbitration enabled individuals to resolve their grievances easily. But court and arbitration records show the opposite has happened: Once blocked from going to court as a group, most people dropped their claims entirely.
The Times investigation was based on thousands of court records and interviews with hundreds of lawyers, corporate executives, judges, arbitrators and plaintiffs in 35 states.
Since no government agency tracks class actions, The Times examined federal cases filed between 2010 and 2014. Of 1,179 class actions that companies sought to push into arbitration, judges ruled in their favor in four out of every five cases.